A Buyers Guide to the Koh Samui Property Market.
A Guide to the Real Estate and Property Market in Koh Samui
In this section we will give some general advice and information about buying properties on the island.
It is of course important to approach buying real estate in any country in the world with caution; as these are major life decisions and financial commitments; they should never be taken lightly. This is doubly true for buying real estate abroad. Thailand has its own set of complex rules about buying, selling and renting properties which are likely very different from those of your home country. The first piece of advice for any prospective buyer is to make sure you are familiar with the legal issues involved in real estate in Thailand. Have a look at our legal page for some details about foreigners buying and selling property and real estate in Thailand.
Where to buy
It is important for you to be clear about your priorities for buying property in Koh Samui, particularly when it comes to location. The island is not large, at only 247 square kilometers, and yet there are many factors to consider in deciding on a location for your dream home. The most popular areas for real estate continue to be the tourist hubs of Chaweng, Bo Phut and Choeng Mon. Do you want to be near the airport? Near to the supermarkets? International schools? Hospitals? It may be that you want a quiet resort near to a secluded beach, but what about the resale opportunities? It is certainly worth staying on the island and exploring the different locations before making a decision. We will be happy to give you advice and talk through the options available.
Priorities for each property
There are many factors in choosing a location but what is most important for your needs? The environment cannot be changed; if you buy in a busy tourist resort then the noise level at night is never going to go away. There are many things you can never change about the property, such as the size, the view and the location. It is certainly these factors that you should spend most time considering. This is not true of things that can be easily changed, such as the decoration, the floor tiles and so on. It may be worth remembering this when you look at properties the inside of a place could be beautiful, but can you live with the noise from the local nightclub? Each property should be viewed as if it were empty and the buyer should focus on the permanent factors.
Which Real Estate Agent in Thailand?
If you are looking for property in a foreign country you need to have some local allies who can give you advice and guide you through the complex issues involved in making the right choices. This means finding a real estate agent who has experience of the local market and who is not affiliated with developers. You want to find a truly independent agent who has good local contacts, has a good knowledge of the local issues and who will work on your behalf to find the best deals.
Which type of property and real estate is right for you?
Understanding the legal situation with regards to purchasing real estate and property in Thailand is the best way to start considering what type of property is right for you. The most important factor in Thai law that relates to real estate is that foreigners cannot own land. Foreigners can lease land or hold land in a Thai limited company. In making a decision it may be helpful to ask the following questions:
- Would a condo be a more reasonable choice than a detached house? Is the hassle of setting up a Thai company to hold the land really worth it?
- Would a condo be easier to rent out than a house?
- What type of property would be easier to sell in the future? The same rules that apply to foreigners owning land in Thailand are likely to carry on into the future and may well affect your resale opportunities.
- How will the number of bedrooms, size of bedrooms, number of balconies, view and so on affect the future resale opportunities?
The Rental Market in Thailand.
Rental markets around the world are notoriously fickle and are subject to huge changes over time. It is almost impossible to predict how a market will look in a few years. Even if you do extensive research on the state of the market, the future is unpredictable; it may be that the fantastic view from your condo may be totally obscured by a new high-rise block just a few years after you buy. And yet you can make reasonable assumptions about what future renters will want; people will always want a pool, a good view will always be a good view, and noise will always be noise. Putting yourself into the shoes of people looking to rent will help you make the right choices when you are buying properties. Real estate developers will be happy to provide you with their own projections, but you need to do your own research in order to make the best decisions.
Managed residencies versus stand-alone properties
An important factor for consideration in buying real estate is whether to buy a property that has the benefits of a managed environment, or one which is private to you and your family. It is very common in Thailand for places to carry a service charge, paid annually, which covers security guards, maintenance and general building upkeep. In making a decision about this you should consider the benefits of the security and the maintenance of the property over time, all of which make it a better option for future resale. On the other hand you may be happy to go it alone and enjoy the privacy of a stand-alone property. There are also several property management companies who could provide a more tailor made service for any private property for a fee.
It is very difficult for foreigners to persuade Thai financial institutions to give them loans. If you are looking to finance any real estate project then in most circumstances this will need to be secured in your own country. When money is due for the payment of a property this must be made from a foreign bank account in a foreign currency. It is essential that potential buyers have considered and have made arrangements for finance before they negotiate with developers. Developers will often offer finance for properties, but otherwise the expectation is that you can finance your own plans.
How to Reserve a Property
Once you have selected a property and the price has been agreed between you and the developer, you can pay a holding deposit to take the property off the market. The amount of deposit is not set but is normally 100,000 baht for a condo and twice this for a villa. There are no specific rules about which party draws up the reservation agreement but it is typically the developer. The important thing is for you to review and get advice on the agreement. The agreement should clearly state that your deposit is fully refundable if the purchase does not go ahead. Typically there is then a period of around 45 days before the sales agreement comes into effect.
Due diligence is the series of checks that your legal representative would carry out to make sure the sale is legal. For example, is the property free from any other mortgages or debts? Does the seller have the legal right to sell the property? Does the property breach any property laws? If the property is being sold by a Thai company, does the company have any debts? These kinds of checks are vital for the purchase of a property and should always be done by your legal representative.
Off-Plan Properties in Thailand.
In Thailand, as with most developing real estate markets, it is very common for properties to be sold off-plan or uncompleted. Typically you are shown a mock-up of a new property or a show room with the actual development being planned for some time (in some cases many year) in the future. There are obvious risks involved in buying a property that has not yet even been started and you may not get exactly what you expected when the development is finally complete. To mitigate these risks buyers typically rely upon detailed computer generated models and plans of the development, along with a detailed contract that stipulates exactly what you are buying. It may also be worth looking at the history and the track record of the developer, even visiting other properties they have developed previously.
The advantages of an off-plan property is that the developers often sell properties at discount prices when they first advertise. After the building work starts and the costs of construction have been met, prices tend to rise. The best properties in a development are usually sold first and there are real advantages to purchasing early; these units will have the best views, the best location and best use of space. It is also good to come in early to a development and have some say in the construction of your unit, the layout as well as the interior design.
Distance to the Beach on Samui and Building Regulations
Before you can construct a property you need to acquire a building permit. The following sets out the restrictions of where you can build in relation to the beaches:
Area 1 – For land located up to 10 metres from the beach, construction is forbidden.
Area 2 – For land located up to 50 metres from the beach, you can only construct a single storey building with a maximum height of 6 metres (including the roof). Also, each building cannot exceed an area of 75 square metres.
Area 3 – For land located up to 200 metres from the beach, the maximum height allowed for any building is 12 metres (including the roof). Also, each building cannot exceed an area of 2,000 square metres.
Area 4 – For land located more than 200 metres from the beach, the maximum height allowed for any building is 12 metres.
At the time of writing this guide, flat roofed properties are not permitted on the island.
Distances above Sea Level
Level 1 – Land less than 80 metres above sea level
In general, no extra rules apply here, subject to rules relating to hotels (50 percent of hotel land area must be left undeveloped), residential projects consisting of 10 or more units, in addition to water dams, golf courses and airports.
Level 2 – Land between 80 and 140 metres above sea level
Property can be constructed on land that is 100 square wah or greater (if the land is less than 100 square wah, construction is forbidden). Structures cannot be higher than 6 metres in height and must leave 50 percent of the land unbuilt on and ‘green’; they must be traditional Thai design. Roofing and building materials should blend in.
Level 3 – Land greater than 140 metres above sea level
Within this range, the rules for Level 2 apply and also structures cannot exceed 90 square metres.
Gradient of Land
At every level, where the slope of the land is between 35-50 degrees, you can only build a single family home which must not exceed 80 square metres in area and which must leave 75 percent of the land unbuilt. Also, the land area must be 120 square wah or more, otherwise construction is prohibited. For any slope greater than 50 degrees, construction is also not allowed.
It is most typical for properties with a condominium title issued by the government to come with a structural guarantee of five years and a two year non-structural warranty. For properties not regulated by the government, you may have to ensure that the guarantees are in place yourself. This includes structural guarantees (roofing, floor slabs and so on); other defects not part of the main structure (tile work etc.); Manufacturers (items put into your unit by the developers such as air-conditioning units etc.); and a ‘Return to site policy’ for a specific time so that if anything happens within the first few months the developers are still liable for repairs. It is always worth confirming exactly what guarantees are in place with any new development, but also with properties that have been completed.